Mr. Speaker, I am very pleased to speak today about tax fairness. I am proud to be a part of this government, which is doing a lot for tax fairness.
I am very happy to rise this afternoon to speak to the opposition day motion regarding tax fairness because our government's record after two years speaks for itself, and I am glad to comment on it.
First, in preparation for today's opposition motion, I went back and looked at our budgets for the last two years that we presented. I looked at budget 2016 and our platform to create a stronger middle class, which we are doing through the lowest unemployment rate over 40 years, and the fastest economic growth rate that we have seen in probably 10 or 15 years. A lot of great things are happening.
I looked at what was in budget 2016 and budget 2017 on tax fairness, on fighting tax avoidance, and on fighting tax evasion. If we look at budget 2016 and we take out some of the comments from there, it stated:
|| Canada and other members of the G20 and the Organisation for Economic Co-operation and Development (OECD) have worked together to develop recommendations aimed at addressing BEPS.
We joined our international profit partners to fight tax avoidance and tax evasion. As part of its commitment to protect the integrity of the Canadian tax base, the Government of Canada is acting on certain recommendations of the BEPS project.
Budget 2016 proposed new legislation to strengthen transfer pricing documentation by introducing country-by-country reporting for large multinational enterprises.
I wish to add that I will be splitting my time today with my hon. colleague and friend, the member for .
Second, the CRA is applying revised international guidance on transfer pricing by multinational enterprises, which provides an improved interpretation of the arm's length principle.
Third, Canada is participating in international work to develop multilateral instruments to streamline the implementation of treaty-related BEPS recommendations, including addressing treaty abuse.
We also enhanced domestic tax integrity. We looked at how high net worth individuals are using private corporations, or CCPCs, inappropriately to reduce or defer tax. To help address this, we put into place numerous measures in our first budget in 2016, including limiting the use of the multiplication of a small business tax credit, or the $500,000 small business tax deduction.
That was done to ensure that all individuals are paying their fair share of taxes in this country, and to ensure that we have the revenues needed to pay for those programs that Canadians use day in and day out, and that Canadians value.
We also put into place measures to ensure that investment income derived from an associated corporation's active business is ineligible for the small business deduction in certain circumstances. We also closed tax loopholes that allowed private corporations to use a life insurance policy to distribute amounts tax free that would otherwise be taxable.
More measures were put in place in budget 2017, including an additional $444 million for the CRA, so that it would have the tools and the resources to combat tax avoidance and tax evasion and, yes, to bring about tax fairness for all Canadians coast to coast to coast. This was on top of the first $500 million we put in place.
In budget 2017, we estimated the CRA would be able to recover $2.6 billion in additional federal revenues. The good work to recover those funds continues. Initial steps have been taken to prevent wealthy individuals from using private corporations to inappropriately reduce their tax payable. We closed tax loopholes on other measures. We have entered into agreements, and we introduced legislation that was passed in 2016 on BEPS. We have eliminated ineffective and inefficient tax measures, and we have also provided greater consistency in the tax treatment of similar types of income with other government priorities and current economic conditions.
We have given the CRA the tools to fight tax avoidance and tax evasion, which the previous government across the aisle, cut. The former Conservative government actually cut funds from the CRA. It did not give them the tools and the resources the agency needed to do its job.
Thus, in two years, we have given the resources and invested the funds necessary for the CRA to do its job. It has increased verification activities. CRA has hired additional auditors and specialists with a focus on the underground economy, and developed robust business intelligence infrastructure, and risk assessment systems to target high risk international tax avoidance cases. Also, it has improved the quality of investigative work that targets criminal tax evaders.
Those are only small parts of the measures that were done in budget 2016 and budget 2017, both budgets aimed at strengthening the middle class and helping those working hard at joining the middle class. Our work is not done. We have done a lot more.
On tax fairness, we have cut the small business tax rate from 11% to 9%. When these measures are fully enacted, every business in Canada, from coast to coast to coast, will have a reduction in its taxes payable by $7,500. That is $7,500 businesses can use to invest in HR training, capital, equipment or to give raises to their workers.
We have cut middle-class taxes for nine million Canadians. Over five years, that is about $25 billion in tax relief that will go to nine million Canadians, who work hard every day, so they will have more money to save, to invest, to spend on their kids, and so forth.
We have eliminated income splitting, which the prior government brought in. It was the most regressive form of taxation policy that only benefited the wealthiest in Canada. In fact, I do not know why the prior government introduced that measure because it was so regressive. It was so unfair to the majority of working Canadians across the country, to the majority of middle-class Canadians. We have eliminated that.
With that, we brought in the Canada child benefit, which benefits nine out of 10 Canadian families on average $2,300 more per year. The CCB is tax free, it is simple, it is monthly, and it is helping to lift Canadians out of poverty. Most important, it is helping to lift Canadian children out of poverty. We should all be proud of that.
On the CCPC, we consulted with Canadians on how to make our tax system more efficient and more fair. After the summer consultations, we came back and tackled income sprinkling. This measure was used by certain high net worth individuals across the country, and it was unfair. It was allowing them to reduce their taxes payable to levels that were unfair to other Canadians and it was allowing two individuals with the same income to avoid and create a big differential.
Another thing we reversed was the TFSA. The prior government would have doubled the TFSA amount to $10,000 when we knew the forgone revenue from that doubling would have impacted programs in the future, my children's program. We knew that the only individuals in Canada who could have afforded that $10,000 a year would have been wealthy individuals. Fewer than 10% of Canadians max out their TFSA at the $5,500 level currently. Shame on the other side for bringing in that measure.
We strengthened the Canada pension plan. We enhanced it for future generations. In my riding alone, the guaranteed income supplement increase benefited over 2,000 of my most vulnerable seniors, up to $800 each this year.
That is the good work our government is doing. That is the good work that Canadians elected us to do. We continue looking at ways to boost and to bring in tax fairness.
I am proud to say I that am the committee member on the finance committee. We invited our to come to committee. I was the member on the finance committee who brought forward the motion to look at tax avoidance and tax evasion. I am proud of the work we did as committee members in producing a report that we brought forth to the national revenue minister and of the number of the recommendations within that report. In looking at the reply of the national revenue minister, a number of those recommendations have been fulfilled.
I am proud of what our government has done with regard to tax fairness. That is what our government is about. Those are the resources we have implemented in CRA.
Our record for offshore related files alone since the end of the year shows that the Canada Revenue Agency is conducting audits on more than 1,090 taxpayers and is criminally investigating more than 20 cases of tax evasion. The CRA, with the resources we have implemented, has the resources to risk assess 100% of large multinational corporations annually and is better able to identify those taxpayers who participate in aggressive tax avoidance schemes.
We have done a lot. We are co-operating with our partners internationally to tackle issues such as transfer pricing. We are co-operating on BEPS, which is coming into force. We are ensuring that CRA has the resources to tackle complex, multi-level cases of tax evasion. That is what a government does.
A government stands up for middle-class Canadians and working-class Canadians. We work very hard every day to ensure they have the resources to make a great living, to have a brighter future for their children, but also ensure all Canadians and all companies from coast to coast to coast are paying their fair share of taxes.
Madam Speaker, it is an absolute pleasure for me to rise here today to speak to this opposition day motion on tax havens. As always, I am so happy to speak on behalf of the residents in Davenport, who I am so proud to represent.
As I was reminded recently by Davenport residents at a pre-budget consultation I held in November 2017, tax fairness and the federal government continuing to pursue those companies, organizations and individuals who avoid paying their fair share of taxes is a top priority for them. That is very important.
Canadians work hard to support their families and most do pay their fair share of taxes. In return, Canadians expect that the Government of Canada will work hard on their behalf to ensure that our tax system is responsive and fair and that the monies are spent on priorities important to Canadians.
I know we have heard this a number of times over the full day today, but it warrants repeating. Over the past two years, our government has taken concrete action to go after tax evaders with the historic investment of nearly $1 billion in the combined budgets of 2016 and 2017. No other government has invested this much in the Canada Revenue Agency to crack down on tax evasion and combat tax avoidance.
We started in 2016 with an investment of $444 million in the CRA to enhance its ability to detect, audit and combat tax evasion and avoidance. Because we saw much success, we invested an additional $523.9 million over five years.
As a result of this huge investment, our government has made significant progress in combatting offshore tax evasion and aggressive tax avoidance. I encourage all hon. members of the House to share with their constituents the progress that the Canada Revenue Agency has made in this area and the steps it will take going forward to ensure a more responsive and fair tax system for all Canadians.
Just last September, the provided an update to all of us addressing the recommendations made by the House of Commons Standing Committee on Finance and the actions taken by the CRA on this front. It is an absolute pleasure for me to share with members some of the highlights of the CRA's results achieved between April 1, 2016 through to March 31, 2017: 335 cases were referred for criminal investigations; 123 search warrants were executed; 32 criminal charges were laid under the Income Tax Act, the Excise Tax Act and/or the Criminal Code; 37 convictions for tax evasion; $10 million in court fines, 50.6 years of jail time were imposed; and more than 111,000 audits were completed, with a fiscal impact of $12.5 billion yielded from audit activities.
While we expect to recover $2.6 billion in revenue from the crackdown on tax evasion, this amount does not reflect the gain that is expected to be realized by our provinces and territories across Canada whose tax revenues will also increase as a result of federal action, investments and initiatives.
The issue of tax havens demonstrate quite clearly that tax cheating remains a significant global multi-billion dollar issue that transcends borders. Not only is Canada taking action at home, we are also playing a key role internationally.
I am happy to relay that Canada plays a key role in international intelligence when it comes to combatting overseas tax abuse. We share our information and we get information that helps us to track down evaders. With our partners in the G20, as well as with our partners that are part of the Organisation for Economic Co-operation and Development, Canada has been actively participating in the multilateral project on base erosion and profit shifting, also known as BEPS, which tackles international tax planning arrangements used by some multinational enterprises to inappropriately minimize their taxes. Just to remind everyone, Canada signed on to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS in June 2017.
As part of Canada's choices under the multilateral convention, Canada will adopt BEPS standards including the treaty abuse rule. Our government is committed to working with international partners and is involved in initiatives to better tackle the issue of tax evasion and tax avoidance.
Canada is heavily engaged in an extensive array of tax treaty networks around the world, having signed onto 92 tax treaties and 22 tax information exchange agreements as of November 2016. In addition, in May 2016, Canada signed a multilateral competent authority agreement with its OECD and G20 partners to formalize the sharing of information contained in the country-by-country report, or CbCR. CbCR, together with the existing treaties and the BEPS project will provide Canada with more information to risk assess taxpayers who may be aggressively avoiding or evading taxes offshore.
Given that our government is fully committed to fighting tax evasion and aggressive tax avoidance, we are establishing a new level of transparency to report results to Canadians. Just as a quick aside, I also co-hosted a joint pre-budget consultation with a number of my colleagues a few weeks ago and a number of those residents had actually attended the pre-budget consultation. Indeed, that verified that they are looking for transparency from the CRA. They want to see public results from the investment that the government, on behalf of all Canadians, is making to recoup taxes. They believe that with more transparency there will be more disincentives to those who may be thinking about using offshore tax havens to evade paying their fair share of taxes.
The Canada Revenue Agency has identified $25 billion in fiscal impact from audit activities over the last two years. Almost two-thirds of this was from audits of international, large business, and aggressive tax planning activities. Fiscal impact by definition does not imply amounts collected, but amounts identified. For offshore-related files alone, as of December 31, 2017, the Canada Revenue Agency has been conducting audits on more than 1,090 taxpayers and is criminally investigating more than 20 cases of tax evasion. It will continue to apply penalties to all cases of serious tax non-compliance.
As mentioned, Canada is collaborating with international partners. We recognize this is crucial to identifying and taking action against those who are evading and avoiding paying their fair share. In fact, thanks to these actions, starting this year, Canada will be able to automatically exchange information with other countries to identify taxpayers with offshore accounts through the OECD's common reporting standard. Legislation was passed in December 2016 to implement the standard in Canada as of July 1, 2017. This allowed Canada to undertake a first exchange of information with other countries.
We have indeed started working with our international treaty partners to obtain information that may not currently be in the agency's possession, information that will help the government take compliance actions according to the information available in each case, including referrals to the CRA's criminal investigations unit and, where appropriate, the Public Prosecution Service of Canada for possible criminal prosecution.
I want to emphasize that the CRA does not depend on leaked lists such as the paradise papers or the Panama papers to tackle the issue of tax evasion and aggressive tax avoidance. Thanks to the government's investment in the CRA, by the time such a leak occurs, the agency is already well advanced in carrying out its work in identifying and pursuing those who are not paying their fair share.
Our government's leadership and contribution to international best practices in this area is providing Canadians with a revenue agency that is a world-class tax and benefit administration. Canadians expect no less from us and we are delivering on our promises.
The CRA will continue to build on its capacity to detect and combat tax cheating and ensure that those who choose to break the law face the consequences. We will close in on any wealthy individuals or corporations that try to avoid paying their fair share of taxes and that drain resources away from the services that support and improve the lives of all Canadians.
Aggressive tax avoidance and tax evasion continue to be a concern, not only here in Canada but also abroad. Like most Canadians, I am frustrated to hear about individuals who try to avoid paying their fair share of taxes. As Canadians know, not only is it unfair and against the law but it robs the government of the revenues needed to deliver the programs on which Canadians have come to rely to improve their quality of life.
Hard-working Canadians who pay their fair share of taxes expect the government to do its part to crack down on tax cheating. This is what Canadians expect and this is what the government will deliver.
Madam Speaker, I will be splitting my time with the member for .
It is a huge honour to speak to the motion as the critic for small business and tourism and as the new critic for veterans affairs, and it is a huge honour to rise under that new portfolio for the first time. There are big steps to follow, certainly with the previous MPs who have led this fight on behalf of veterans. I want to take a moment to thank all our military and RCMP veterans and their families for their service and sacrifice. It is a huge honour to be asked by our leader Jagmeet Singh to take on this important file on behalf of Canada's NDP. I look forward to working with and serving our veterans and their families.
Today we are speaking to a motion that was brought on March 8, 2017, by the member for . The motion today recalls that motion adopted March 8, 2017, which was supported by the government, and it asks the government to keep its election promise to cap the stock option deduction loophole and to take aggressive action to combat tax havens, and that the House call on the government to respect that resolution by ensuring both measures are included in budget 2018.
The government has yet to follow through with the motion that was adopted in the House. What we are doing today is again asking the government if it will support the motion in its upcoming budget in March 2018.
Increasingly, we are seeing two worlds in Canada: the world for Canadians that is unaffordable, with people who are struggling with precarious work; and the other world with the elite, the well-connected, the wealthy, the people at the top, and the most powerful. The motion calls on the government to close tax loopholes for the rich. There are tax havens right now that are leaking, the greatest leakage in the Canadian economy, about $11 billion a year. That is a lot of money. Just to put things into perspective, that is about $325 million per riding in Canada.
I will touch on the CEO tax loophole option to start. I was on a plane and I talked to someone from the tech industry, one of the top CEOs of a great company here in Ottawa. I asked him if this incentive was the type that drew CEOs and talent to Canada to make us more competitive, and he said, “Actually, not at all.” He supported my thoughts that when one has success, when one wins, when one's company is thriving and doing well, one does not mind paying a fair share to build this great country we live in. In fact, he talked about ways that would support the tech industry and CEOs in Canada's largest corporations with more investment in programs like SR and ED and economic development to help innovators and people trying to get started. It was great to hear from someone right there at the top, who could confirm with me that it was not going to take away our competitiveness, which has certainly been an argument from the other side.
When it comes to tax havens and tax fairness, the Liberal government says it is chasing tax cheats. In fact, the people who are using tax havens, the CEOs who are using tax loopholes, are using legal tax measures. We are actually asking the government not to go after tax cheats but to close the loopholes and move forward with legislation so that we can make sure everyone is paying their fair share. It is one thing to invest $1 billion chasing people, but we cannot chase people who are using legal tax havens and legal tax loopholes. We are asking the government to follow through with its election promise and change these agreements to close the CEO tax loophole.
Through the Panama papers and the paradise papers, we have seen how many people are using these tax havens through some legal and some illegal measures. Recently, we learned of a Canadian mining company that has avoided paying over $400 million in taxes, money that would go to social infrastructure to build a strong health country. It could help pay for many things we need here at home. In fact, there are a lot of companies that are now being set up by people who do not even live in Canada and are not Canadians. They are directors of companies in Canada doing business throughout the world. They are using tax havens to move their money offshore and are not paying their fair share of taxes in the country where they have set up and are doing business.
We have a lot of concerns about how tax havens are being used and the economic leakage they bring.
We hear the government talking about some of the tax fairness measures it has brought forward. It introduced a middle-class tax break. Earlier, one of the government members said that someone earning $45,000 a year or less does not pay taxes. That is not true. We could talk to people in our country who earn $45,000 a year and tell them that they do not pay taxes and that there are all these tax breaks for them. They would say that this is not true. I hope they talk to their members of Parliament, if that is what they are saying.
When the government introduced its middle-class tax break, we learned that someone who earns about $23 an hour, $45,000 a year or less, got nothing. How is that a middle-class tax break? Someone who earns $50 to $100 an hour benefits the most. It is about a $700 tax break. This is what the government is calling tax fairness, and it really concerns me.
This is not a way to help those who are not in the middle class join the middle class. In fact, it creates a bigger gap, a widening gap, between the wealthy, the well connected, and those who are struggling to make ends meet. People earning $100,000 to $200,000 a year who got that tax break actually do not think it is right either that someone who earns $23 an hour or less got nothing.
Let us talk about tax fairness. The government has now imposed some limits and increased taxes for small business owners of Canadian companies, but it does not apply that to publicly traded companies. I have to ask why. Where is the fairness when the government talks about the small business tax system?
Why did it take two years to reduce taxes for small businesses from 11% to 9%, which was a campaign promise? We know why. It was not going to do it. The government was in quicksand over the rushed tax proposals it was going to impose on Canada's small business owners, and it was caught. The only way the government was going to save itself was by following through on a promise it had delayed for two years.
We see how the government is treating foreign companies doing business in our country, such as Netflix. They do not pay the same taxes Canadian companies pay. Where is the tax fairness?
Last year I asked the when the government was going to remove subsidies for oil and gas companies, something the Liberals promised in the 2015 election. She said that the government had just started. That is not good enough, not when we have so many options and things we can do.
The government is fighting first nations in court instead of changing legislation to close tax loopholes for CEOs and wealthy individuals. It is not collecting government money when it could be used. As I said, $325 million per riding in this country is leaking through these tax havens and through CEO tax loopholes. It is money that could be going to salmon enhancement, when we have endangered species on the west coast. It is money that could be going to first nations communities that desperately need it. It is money that could be going to environmental protection; to clean energy programs, like the home energy retrofit program; to marine infrastructure; clean water; and return-to-work policies. We have 1.2 million Canadians who are not working who have been injured in the workplace. The government is not putting its time and energy into them. Instead it is protecting CEO stock option loopholes and tax havens and the rich.
The government could be spending that money, that $11 billion a year, fighting climate change through some of the programs I have outlined. The government could be investing in pharmacare and making sure that people who are living on the street have a roof over their head.
The government could be investing in these proposals in communities and regions like mine. My community of Port Alberni has the highest poverty rate in British Columbia. We have been waiting for investments from Ottawa to come to our community to build on economic opportunities that have been presented to government. Instead, those economic opportunities have not been supported. The government is spending money elsewhere, such as on the $8-million skating rink that no one in my riding is going to use.
The government is spending its time protecting CEOs and executives, who do not need a hand, and Canada's largest corporations and wealthiest individuals with tax havens. Like every other hard-working person, they should be paying their fair share of taxes. Instead, the government should be collecting that money and making sure that money is invested in communities like mine.
Madam Speaker, I am very pleased to rise in the House today to support the motion introduced by my colleague, the member for .
Eleven months ago, government members voted in support of an NDP motion that recognized that the federal government was losing tens of billions of dollars annually to tax loopholes, deductions, and exemptions that mostly benefited the ultra-rich, and that the use of offshore tax havens was costing the government more than $7 billion annually. Government members voted in support of the NDP's call to close those loopholes.
Almost a year later, where are we on the promise to act? Sadly, we are still losing more than $7 billion annually due to offshore tax havens and nearly $1 billion annually to the stock option deduction loophole. By continuing to refuse to tackle tax havens and tax loopholes, the Liberal government is showing us what its priorities really are. Those priorities are not everyday Canadians, or even our national heroes.
Breaking an election promise, the Liberals have refused to reinstate lifelong disability pensions for veterans. The even had the audacity to tell a wounded veteran in Edmonton last Monday that the government cannot afford to take care of the people who have sacrificed their health, their limbs, and their lives for our country. Worse still, in Vancouver, there are some 100 veterans who are homeless or at risk of becoming homeless. Housing is a basic human right that should be afforded to every single Canadian, especially those who have fought to protect our rights and freedoms.
On the topic of basic human rights, in B.C. right now there are 19 drinking water advisories in effect in 17 first nation communities. Three of them are do-not-consume advisories. That means that for those first nation communities, the water is not safe to use even after boiling. I would ask members of the House to imagine what that is like and ask themselves this question: do they find this acceptable, when Canada is one of the wealthiest countries in the world, or do they think that Canada can do better? Should we not use the billions of dollars of lost tax revenues from CEO stock options and tax havens to pay for these critical services?
This week, The Hill Times, as part of a series on constituency offices, profiled my staff and office in Vancouver East. Vancouver East is an incredibly diverse riding, with over 70 different languages spoken and an incredibly vocal group of activists who always keep me on my toes.
In the heart of my riding, in the Downtown Eastside, a person dies almost every other day from an overdose. It was estimated in December 2017 that the number of opioid-related deaths in Canada could exceed 4,000 for 2017, yet the federal government still refuses to acknowledge this crisis as a national health emergency. How is that possible?
The Downtown Eastside is the epicentre of Canada's opioid crisis. Front-line workers and first responders in my riding are struggling to keep up. Over the holiday season, I visited all the fire halls in my riding. Firefighters told me about the trauma they were experiencing in witnessing not just one person overdose during a shift but multiple overdoses. The impact of responding to these tragedies takes a toll, and our first responders deserve to be taken care of too. The former Minister of Health promised to provide resources for first responders, yet to date, there is nothing.
For the chronically addicted, no action has been taken to ensure that there is a full range of treatment options available to them. If the government had the courage to act, redirecting just a small portion of the lost revenues from offshore tax havens to programs to address the opioid crisis, it would save lives.
Similarly, it would mean that seniors and veterans struggling to pay for prescription medications and dental care would have the care they deserve. An aboriginal mother in my riding who has, over the years, donated hundreds of artworks and cedar weavings to local schools is skipping her cancer medications because she cannot afford them.
For the life of me I do not understand why the Liberals voted with every one of the Conservative members to reject the motion of the member for to begin negotiations for a universal pharmacare program. I do not believe that is what Canadians want from a government that promised real change. I believe Canadians think that we can do better.
If loopholes for offshore tax havens were closed, many of the government's departments could use a boost in funding. Why? Processing delays continue to plague every government department. Let us look at immigration. People have to wait years to get a hearing with the IRB because there is a backlog of over 40,000 cases. Government phone lines, whether they are for IRCC, Service Canada or the CRA, are underfunded and understaffed. My constituents complain every day that they cannot get through to anyone on these phone lines. Last week a constituent called my office in tears because she could not get through to Service Canada to report her father's death and requested that our office call instead and relay this information on her behalf. The fact is that when the government chooses not to properly fund programs and services, people suffer, the real people in our communities, not the people who can go on vacation to a private island or who forget that they have a French villa.
It is not that our government does not have the tools for collecting money. The issue is who it wants to go after. My constituents tell me every day that our government is very good at collecting money. I have a constituent who makes an income of about $4,000 a year from the sale of her art whose taxes have been sent to collection. The government has the tools in place to go after those individuals. I know another single mother whose child tax benefit is being held back because she cannot produce receipts to demonstrate that she has child care. She does not have child care because she cannot afford child care, yet her child tax benefits are being held back because of that. How does that make sense when we have these kinds of situations going on?
When we look at what the government is doing, it promised almost a year ago that it would go after the ultra rich, the top 1% of the income earners, to close these loopholes. Almost a year later not only has it not closed those loopholes, but it has signed more treaties with tax havens to allow for more advances on this front. Then we have the government members saying it was the only way they could establish a path to close those loopholes and go after those tax evaders. That is simply not true. If they had read the agreement, they would know that those new agreements indicate that it is entirely a path to ensure that they do not have to pay any Canadian taxes at all. It further legitimizes these kinds of tax-evasive manoeuvres. Frankly, it legalizes them and authorizes them to go forward.
When we are talking about tens of billions of dollars, imagine what that money could do in every single riding represented in this entire chamber. Imagine what that would mean for a family who could not afford to put food on the table, for people who are living from paycheque to paycheque, for people who suffer mental health challenges and all of a sudden find themselves on the street. Imagine what our Canada would look like if we made this change.
The government has said that it cannot do it, that it is doing so much already, and that the NDP is always demanding more. Of course we are demanding more. Who are we demanding this for? Why are we sitting in this place? I am sitting in this place because my constituents need their voices heard. They want Parliament to work for them, not for those who the government has said are the middle class and those working hard to try to get there, because the government is not really working for them. It is working for the fat cats. It is working for the people who have already made it.
That is not what this motion is about. This motion is about making change. Will the government have the courage to do that? If it does, it should show it in budget 2018.
Madam Speaker, it is a pleasure to rise and speak to today's opposition motion from the NDP.
I will be sharing my time with the hon. member for .
It is always a pleasure to speak in the House. There is much in today's motion from the NDP. There is much sentiment behind it, for which I have much sympathy, and I may agree with some of the objectives; however, I am not going to be supporting it, and I am going to explain why.
It is a two-part motion. Part A talks about what the NDP characterizes as the loophole for stock option deduction. I do not agree that the ability to declare income from exercising stock options is a capital gain as opposed to income is a loophole. A loophole is something that is an unintended consequence or a runaround that one does to get around the intent of the law or a rule.
The existence of the ability to deduct exercised profits from stock options was a deliberate policy choice. It was not a loophole, something that people are sneaking around to do. It was a policy choice originally made for important reasons. It was designed to encourage entrepreneurialism. It was designed to encourage Canadians—and not just Canadians; this is tax policy that exists in other countries as well—to go into business and be able to offer employees, or proprietors of a business, to defer compensation, to be able at the start-up stage of an enterprise to put all of the money that is available and all capital into getting the business off the ground.
When people agree to compensation by stock option, they are inherently taking on significant risk. If the enterprise fails, then there is no compensation. When a start-up company, particularly in the high-tech sector, is struggling to capitalize itself and struggling to compete for talent, being able to defer compensation through stock options is an important way for the company to more efficiently and effectively capitalize its business.
While indeed stock options are a common form of CEO compensation, they are also a common form of compensation not only in the high-tech business, but also in the resource sector, in mining, or oil and gas exploration. It allows companies to capitalize themselves without paying as much in salary compensation. It is often throughout the enterprise that stock options are available.
In my career in the mortgage business in Calgary, I saw many examples of decidedly non-CEOs and non-one percenters who earned compensation from stock options. Sometimes it is every person in the company who might be eligible for stock options. They have taken substantial risk by putting their personal compensation into the hands of the enterprise and its success.
It was a fairly deliberate decision to allow this, so it is not a loophole. I presume we will agree to disagree on whether it is a good thing and agree to disagree that the taxation should be treated differently, but I do not believe it is a loophole, nor is it correct to characterize it as such. I will not support the motion because I do not agree with that part of it.
Moving to part B of the motion, I agree. As a Conservative, and indeed as a Canadian citizen, I absolutely support the rule of law. I support ensuring that all Canadians follow the law, and that the Canada Revenue Agency follow the law and collect taxes from those Canadians who are not paying what they are required to under law. It is extremely important, especially in the self-reporting system, that Canadians all understand that following and obeying the law is important.
It is troubling to know there are people who deliberately subvert the law through offshore tax arrangements, and that in some cases Canadians are following the law but subverting its intent or spirit. Where that is the case, the law should indeed be changed as required.
We have heard a lot in this debate about tax fairness. We have heard it in speeches for the motion, and we have heard it from the government side. When we have heard those speaking from the government side of the aisle, it is quite troubling to hear some of the things that have been brought into the discussion, the patting on the back for a job well done. The speaker before the NDP talked about $1 billion going into tax avoidance and evasion, but was unable to answer the question about how much of that was targeted to offshore evasion, which is the subject of the motion.
The truth is that numbers like those of the expenditures of the agency have been thrown about repeatedly in debate in this House. The 's own department has revealed that much of this is quite misleading. In answers to questions from the NDP about recovering offshore evasion, we have heard about recovering 20 billion dollars' worth of taxes, and in fact budgeting that money. The minister's own department reveals that it believes that only a small fraction of that will ever be captured, and that most of the money under that number is really domestic taxes and not the foreign taxes that were the subject of that motion and of this motion, and many of the questions that have been raised.
The Liberals speak of fairness. What does tax fairness look like under the Liberals and this minister's Canada Revenue Agency? Is it tax fairness to target disabled Canadians by changing the documentation on the disability tax credit, on May 2, and then denying for months that anything has changed, even while the rate goes from an 80% acceptance rate to an 80% rejection rate?
Is it fairness to change the folio, which gives instruction to professional tax preparers, so that they tax the employee discounts for retail and restaurant workers, and then again blame it on the bureaucrats once it comes to light, saying that it was not actual government policy? Well, it was. It was published in the folio, and it came to the attention of Canadians only when the agency itself reported it to the media. Is going after low-wage workers tax fairness?
In one of the speeches earlier, we heard about targeting single parents. Is denying the child tax benefit to single moms and single dads tax fairness? It is not fairness to say to single parents that they have to hire a lawyer, prepare a separation agreement, go through all the work in a failed marriage or partnership to find the other parent and have him or her agree to it, submit it to the CRA, and then have the CRA again say that it is not good enough, that it is not acceptable evidence of being a single parent. We have heard these stories from MPs and their constituency offices. Targeting single parents, diabetics, and low-wage workers is not many people's idea of tax fairness.
We talked about all the additional money going to the Canada Revenue Agency. This money has been going in each year. We are in the third year of this government. Right now, there is an 18-month delay for appeals at the Canada Revenue Agency. If the agency improperly assesses someone and that person goes to appeal, the interest clock starts ticking, and there are 18 months of delay before the hearing takes place. Is that tax fairness?
We will not support the motion. I will leave it at that for questions and comments.
Madam Speaker, I have been listening to the debate since this morning and I am pleased to rise in the House today to speak to the NDP's motion. However, I must warn my colleagues that we have already decided to vote against this motion for various reasons that I will try to explain. I would like to thank my colleague from for moving this motion since it gives us an opportunity to debate issues that are important to Canadians and to discuss our response to and our concerns about this.
At first glance, the motion is a bit misleading because it combines two very separate issues. First, it deals with the taxation of stock options for business executives. Second, it deals with the matter of tax evasion, which we already know is a serious problem in Canada.
The first issue is stock options, which are a completely legal means of compensation under the Income Tax Act, a law that was passed by various former governments since it has been amended a number of times in the past. The purpose of this law is to allow the government to collect enough money to keep the government and the country running properly and to promote an entrpreneurial climate that will enhance the economic vitality of the country and by extension the quality of life of Canadians. That is very important.
The second issue is tax evasion, which is a major problem. All parties in the House recognize that this is an illegal practice. I think everyone agrees on that. Tax evasion flouts the obligation that all Canadians have to declare all of their earnings. If they do not, they may be subject to fines and even face criminal charges. That is what is happening in a number of cases across the country. The government has high ambitions in that regard. I will talk more about that a little later.
Before speaking to both topics, I must protest against the NDP trying to force a vote by creating a false dichotomy: either you are with them, or you are with the bad guys. This is not a black and white issue; there are grey areas. Unfortunately, in this motion, it is either one or the other. As such, we will not be able to support it.
On the issue of tax credits for stock options, I must point out that this is an essential tool for start-ups, since not all of them can afford to pay big salaries to their employees. Offering shares is a way of rewarding all the owners to some degree by compensating for the income that they will not be earning, since they will need to regularly invest in the business. It is a type of compensation that depends entirely on the company’s success.
I know of what I speak, even if my business is not listed on a stock exchange and I do not own any stocks. I have already played that game, but not anymore. As an entrepreneur, I know first-hand that starting a business can have very negative consequences on the family and on the business itself. There are ups and downs. I have owned a business for 25 years and I can say that it is not always easy to create and keep jobs, and what is even more challenging is to grow a business, which means taking risks. Business owners are the ones to bear those risks.
I am pleased to say that the top entrepreneurial city for 2017 was Rivière-du-Loup, in my riding. My region has a strong business climate, but it is not because small businesses are publicly traded or because these people are being paid in dividends through stock options, quite the contrary. Small businesses make up 90% of Canada’s economy and not all small businesses are like those listed on an exchange and able to afford to provide stock options. Despite that, entrepreneurs like me are personally working hard to develop the local economy.
A lot of people are included in the middle class. Entrepreneurs starting up a business often find themselves in precarious situations, risking their own money and not having a stable income or a pension fund or employment insurance. It is a reality that I face and have faced in the past.
I can assure my colleagues that I have taken family risks for the good of my business, which is doing very well today. However, when I was starting out, that was not necessarily the case. Things were extremely challenging. Success is really not guaranteed.
According to Industry Canada, only 50% of small businesses make it through the first five years. Some will certainly be quite successful, but others will fail. The NDP takes issue with the fact that the sale of shares obtained through stock options is taxed at only 50% of the amount, but they also disregard the fact that many, if not half, of entrepreneurs will end up with stock that has no value.
The reality of the stock market is that it is always fluctuating. Just a few minutes ago I saw on the Internet that the stock market lost 1,000 points today, following a 2,000-point loss last week. Over the course of four days, the stock market lost about 4% of its value, which also has an impact on stock options. It seems, then, that New Democrats are being misleading by trying to stir up resentment against the wealthy, who they claim are not doing their part.
Here are the facts. Anyone in Canada earning an average income of up to $46,000 per year pays 15% in federal tax. That is actually closer to 11% because of the basic exemption on the first $12,000. A member of the 1% who earns over $230,000 annually pays 33% in federal tax on any amount over $205,000. Even taking into account the current stock options credit, one percenters who risked everything to grow their business and then sell the shares they got instead of paycheques still have to pay a 16.5% federal tax when they sell those shares. That is in addition to corporate tax, which is 11% to 15% and would already have been paid. That is another tax the NDP would like to raise. Those people are already paying as much tax as Canadians earning an average income, if not more.
If the NDP were to eliminate the stock option credit, companies would no longer have this tool, which is essential in helping companies start up in Canada. This fact makes his motion completely unacceptable to us. What is worse, the tax increases that the NDP would enforce would make businesses flee to other countries, which brings us to the topic of tax evasion.
We think that the best way to combat tax evasion is to foster a competitive business climate in Canada, eliminating any temptation to look elsewhere. Yes, it is true that there are some unscrupulous people who are looking for ways to avoid their legal responsibility to declare all of their assets and foreign income. The parties in this House all agree that this in unacceptable. We expect that, no matter which government is in power, the Canada Revenue Agency will use its investigative and judicial powers to deter people from breaking the law. I encourage Canadians to speak out against all forms of tax evasion.
The CRA, under the leadership of the , has proven itself to be absolutely incompetent in recent years in going after the bad people. The minister is constantly repeating the same answer, regardless of the question. She tells us that the government has invested $1 billion in fighting tax evasion, and that it has recouped nearly $25 billion. We know the story, but the fact remains that before Christmas, the minister was forced to apologize for having misled the House. She admitted that much-touted figure of $25 billion was not based on the facts, and that she had quite obviously made it up.
The media is reporting that not one Canadian named in the paradise papers has been prosecuted so far, but we see that a troubling number of ordinary Canadians are falling victim to the CRA's excessively dogged determination. I am talking about single mothers who are being asked to pay back $8,000 they received through the Canada child benefit either because the CRA did not believe that their children truly existed or because they thought that the mothers were no longer with their spouses. In an interview with Radio-Canada the taxpayers' ombudsman described the situation as problematic and criticized, as we have, the CRA for attacking the vulnerable.
In my riding, a company wanted to switch banks and an employee in charge of the company's finances made a transpositional error in the date and the company was penalized financially for that. The company has been around for 40 years and has always paid its taxes, but now it is being slapped with a $3,000 bill, which is totally unacceptable. The CRA should target the right people. Unfortunately, that is currently not the case.
Madam Speaker, it is a privilege to rise to speak in support of this motion moved by my colleague, the hon member for , which reads as follows:
|| That the House recall its resolution adopted March 8, 2017, which asked the government to keep its promise to cap the stock option deduction loophole and to take aggressive action to combat tax havens, and that the House call on the government to respect that vote by ensuring that both measures are included in Budget 2018.
I, on behalf of the good people of Vancouver Kingsway, rise to state my full support for the motion and urge all members of the House to support it. Frankly, reading the motion, it is going to be difficult to understand how any member of the House can vote against it, but we will see what happens when it comes to a vote.
From a general philosophical point of view, I want to start by saying that we as parliamentarians are elected by the people of our ridings to come here to Ottawa to pass laws for the governance of Canada. When we do so, a question that is with us every day is this: what are the fundamental underlying principles and objectives and values that ought to come into play when we discharge those duties?
First and foremost, one of our most sacred obligations here as parliamentarians entrusted with the governance of our country is to make sure that the citizens of our country are safe and secure. Safety of course starts from a basic physical point of view. We want to make sure that every person in this country has the right to fully embrace the rights afforded by our Constitution and that are given in a free and democratic society such as Canada, and that they do so with their physical integrity completely intact.
At the same time, I do not think safety and security are limited just to the physical realm. I know that I, as a member of the New Democratic Party, come here with a very fundamental commitment to the concept that all citizens of this country also have a right to live their lives with a decent security of person, economically, socially, and culturally as well.
One of the fundamental issues in society and one of our fundamental obligations as parliamentarians is to pass laws and take measures that have, as their uppermost consideration, the welfare of our citizens. The ability of each individual in our country, every man, woman, and child, and people who identify in every expression in between, to achieve a decent standard of living is something that we as Canadians are proud of. We believe that every single person in this country should have a minimum standard of living as a feature of the dignity of living in a modern democratic advanced society.
At least we in the New Democratic Party understand the critical role that government plays in that. We wholly respect that the market is a critical part of our economy and delivers many things in an efficient and effective way that only the market can do. The full breadth of consumer items, the services that Canadians rely on, the innovation, creation, and production of all of the gamut of commodities and services and resources that Canadians treasure and that are a part and parcel of a modern economy in the 21st century are adequately provided by our market.
However, we in the New Democrats fundamentally understand that the market does not produce everything. There are some things that the market cannot do effectively or efficiently. It cannot produce housing for every single person. The market cannot make sure that every single child is educated in this country. I am not just saying that as a matter of philosophy. Anybody who understands history will know that left completely to the marketplace, which is motivated by the underlying profit criterion, capital will flow to where it is most profitably applied.
There are victims of that. There are people who, for various reasons, whether they are poor, disabled, or whether the vagaries of life's circumstances have put them in that place, are not able to prosper or compete, and they get left behind. That is where the role of government and the state come in. Most Canadians want a strong government that will fill in those gaps that the market cannot provide, and will help provide the standard of living that we want every single citizen in this country to achieve.
The government provides health care, education, and social programs, things like employment insurance, to be a social safety net to catch people when, through no fault of their own, they find themselves out of work, whether by technological change or by business failure. Social programs include worker's compensation for workers who through no fault of their own get hurt at work and are unable to work any longer. Social programs assist them, so that they are not cast upon the heap of poverty. We as a society recognize that there has to be a safety net for people like that.
We as a country of immigrants, and I dare say everybody, other than the indigenous members of this House, can trace our roots to immigrants at one point or another who have received support of some type to integrate, because we recognize that people need some assistance to fully integrate into society. We recognize that this basic financial protection and standard of living we want for everyone in this country is actually a foundation that makes meaningful participation in our democracy possible.
People cannot fully exercise their rights as citizens in this country to pursue their dreams, careers, and participate in our democratic traditions if they do not have their fundamental needs met, things like basic housing, enough food, and basic clothing, the essential ingredients that make meaningful participation in our society possible.
The question then becomes, how does the government fund these programs? How much money must the government raise in order to adequately provide the funds to discharge those responsibilities that I think everybody in the New Democratic Party believes every citizen deserves? The second question is, how do we raise that money, and from whom? These raise fundamental questions as to why we are here as parliamentarians, and strike at the heart of government and what we do.
The motion here touches on those fundamental questions in the following way. It calls on the government to act on a promise it made to Canadians in the 2015 election, where the and other Liberal candidates, who ran for office, told the electors in their ridings that if they were elected, if they received the trust of those voters, that they would come to this place and address an issue of inequity in our tax system.
What they said they would do is close or cap the stock option loophole, and take aggressive action to combat tax havens. In keeping with this, once the Liberal government was elected, 2015 and 2016 passed with little or no action on those promises.
That led the New Democrats to move a motion last year, which was passed in this House on March 8, 2017, almost a full year ago. It asked the government to address tax loopholes that primarily benefit the wealthy, including keeping that Liberal campaign promise of closing the stock option deduction loophole. It also called on the government to crack down on the use of tax havens by tightening rules for shell companies, renegotiating tax treaties that let companies repatriate profits from tax havens to Canada tax free, and ending penalty free amnesty deals for individuals suspected of tax evasion.
I am going to stop there and talk about the broader context. We are seeing two worlds in Canada. The world for most Canadians is becoming increasingly unaffordable. It involves more precarious work, and it is a harder place in which to get by.
In the riding I represent and come from, in Vancouver, an entire generation is unable to house themselves. Young people, students, young families, seniors, and middle-class families are being driven out of Vancouver and the Lower Mainland. They are being driven out of places like Victoria, and not because they want to. They have lived in these communities, made careers there, and had family there, but they are being driven out, because they cannot afford to locate any kind of housing that is affordable, whether to own or rent. That story is replicating itself in communities across the country, including the GTA and other places.
People in their 20s will say that with every year that passes it is increasingly difficult to find permanent, full-time jobs that have pensions and pay benefits, like people of my generation, once counted on as a matter of course. Instead, they are faced with part-time jobs, temporary jobs, jobs with no benefits, jobs that are, as we call them, precarious. This is the reality for people.
On a global scale, Oxfam released a study recently that said that 82% of the global wealth that was created last year went to the top 1%, and that fully 50%, half of the human beings walking on this earth, 3.5 billion human beings, received 0% of that wealth. Not only is there inequity in our society but the trend is getting worse.
The other world from the one I just described that most Canadians live in is one that could be described as an exclusive club for the wealthy, who get special access and are exempt from many of the rules the rest of Canadians play by. Tax avoidance and tax evasion by the rich undermine faith in our society and our democracy by starving social programs and public services. They send a message to ordinary citizens that the rules of the economic game do not work for them and are, in fact, rigged against them. I believe it will take strong political will to reverse the trend of rising inequality, which began decades ago, and has continued under both Conservative and Liberal governments.
Interestingly, the Liberals voted in favour of the motion that I spoke of that New Democrats moved in the House last March. Since then, not only have they failed to act on it but, increasingly, they have signed tax haven treaties with other countries like Cook Islands, Antigua, Barbuda, and Grenada. With the budget approaching, we think it is time for the Liberals to keep their promise.
I will throw out a few other statistics that describe the reality for people in Canada. By 11 a.m., on January 2, Canada's top paid CEOs had already earned what the average Canadian earns in a year. In other words, the top paid Canadian CEOs earn more in a day and a half than millions of hard-working Canadians will take home in a full year.
Canada's top CEOs earn 200 times the average person's salary, which, incidentally, places Canada in a very rarified crowd that is way out of proportion to the gaps in other countries between the wealthiest and the poor. Two Canadian billionaires possess the same amount of wealth as 11 million Canadians. The top 20% of Canadians in 2016 owned 67% of all wealth or net worth in Canada, and over four million Canadians, including 1.15 million children, live in homes that struggle to put food on the table every day.
In light of this, Canada has a tax code that is full of loopholes, after decades of Conservative and Liberal stewardship of our tax system, that benefit Canada's wealthiest, but leave most hard-working Canadians behind.
The Liberals have failed to fix tax loopholes or address tax havens that primarily benefit the wealthy. The last time I checked, the working people in my riding did not have bank accounts in Luxembourg, Canary Islands, or Bahamas. Liberals are, instead, embracing former Prime Minister Harper's corporate tax approach, and are putting the private interests of their wealthy few ahead of everyday Canadians who are struggling to get ahead.
I will briefly mention a few facts about tax loopholes.
A study by the Canadian Centre for Policy Alternatives showed that 59 tax measures that mostly benefit people with above-average income levels cost the government more than $100 billion in 2011 in foregone tax revenue. The wealth of the ultra-rich in Canada includes salaries, bonuses, share grants, and stock options, and those are aided by these loopholes. We now know these very people also aggressively lobbied the Liberal government to keep those loopholes in place, obviously so they could further grow and protect their wealth. One such loophole is the stock option deduction, which allows those that have stock options to have the revenue created by that stock option taxed at a highly preferential rate.
There was at one time a commission in this country that looked at tax fairness. I still remember the conclusion after it talked to many Canadians and examined our tax system as a whole. Its conclusion was this: a dollar is a dollar is a dollar. Its recommendation was that a dollar earned ought to be taxed the same way for everybody.
A worker who goes to work every day and puts in eight hours and gets paid by salary or by hourly wage at the end of the week gets taxed on that dollar. A CEO who works and makes a vastly increased income should have that income taxed in the same way that the worker does. That, however, is not the way the system works in this country. Instead, perversely, ironically, and most unjustly, people who make the most amount of money pay the least amount of tax on the money that they earned in these cases. That is what today's motion is calling on the government to fix.
In terms of tax havens, tax evasion, which is always illegal, involves the non-declaration or falsification of tax-related information in order to evade paying one's fair share of taxes. Tax avoidance, on the other hand, involves specific transactions to lower the amount of tax payable as a result of a technical reading or application of the law.
In this case, while it may be technically legal it goes against the spirit of Canada's tax laws for Canadians who are wealthy to use tax havens, which are jurisdictions with very low tax rates or other tax incentives that are used to basically wash money that is earned in Canada so it is paid at a lower tax rate and then those profits are repatriated to our country. These are the kinds of mechanisms that are available to a small percentage of Canadians in this country and it starves the government of revenue that ought to be paid here, which would then be used to address those fundamental obligations that I described at the beginning of my speech.
What could we do with that money? The Liberal government has a policy choice here. It can continue to favour ultra-wealthy people and allow them to make use of these tax havens and tax loopholes to keep the bulk of that revenue for themselves, or it can close these loopholes. It can address these tax havens to make sure that income pays its legitimate fair share in Canada to the government. That will result in billions of dollars coming to the federal government that can then be used for other things.
From New Democrats' point of view, we would urge the government to do that and here is what we would urge the government to do with those billions of dollars. We could pay for a national pharmacare program. We could pay for a national dental care program. We could make sure that every family in this country has access to affordable, secure, quality day care for every single child. We could lower tuition rates for students in this country so that we make sure that the next generation of young people can achieve an education that is not only important for their dreams and aspirations but actually is the foundation of our economic growth.
We could implement what New Democrats have been calling for for a decade and that is a national housing program. The federal government could once again re-enter the housing field in this country and start to build tens of thousands of co-operative units, fund social housing for seniors, for young families, for low income individuals, for the special needs community. The federal government has been absent from housing in this country since 1992.
I want to conclude by talking about integrity in the process. The Liberals told Canadians that if they were elected they would close the stock option loophole in 2015. Now they are saying they will not do it.
An hon. member: No, we didn't.
Mr. Don Davies: I hear a member say they did not do it, Madam Speaker. Any Canadian can read the Liberal platform.
The Liberals said they would bring in electoral reform. When the government of Brian Mulroney took CMHC out of the social housing field, the Liberals promised Canadians in their little red book in 1993 that they would restore that and then they broke that promise. They broke it in 1993, 1997, 2001, 2004, and 2006.
Here we are a generation later, and the federal government has been out of the social housing game for basically 25 years. The government's response is that it will get back into it, but the bulk of the money will flow in 2022.
It is time to put integrity back into politics. I am calling on the government to keep its promise and close this loophole.